In a recent case before the Supreme Court of Appeal (SCA), services provided in customs duty-free areas at airports came under scrutiny. The SCA held that the services rendered in duty-free areas to non-resident passengers are subject to Value-Added Tax (VAT) at standard rates where such services are provided in duty-free areas at airports.

Master Currency operated two bureaux de change in the duty-free area of the then Johannesburg International Airport. The SCA was asked to determine whether services rendered in duty-free areas can be considered exempt or zero-rated supplies for VAT purposes.

The SCA held that the provision of bank notes in foreign currency does not constitute incorporeal property. The argument advanced on behalf of Master Currency was that rights derived from currency, originate in the country that issued the currency. The SCA held that services rendered in duty-free areas, on these facts, do not qualify as exempt or zero-rated supplies for VAT purposes. It was therefore held that the appellants’ services rendered in the duty-free area are subject to VAT at the standard rate.